Fair Isaac Earnings Call Insights: Scores Side and License Sales Cycle

Fair Isaac Corp (NYSE:FICO) recently reported its third quarter earnings and discussed the following topics in its earnings conference call.

Scores Side

Manav Patnaik – Barclays Capital: The first just the details in terms of the $20 million, I think you said contribution from acquisitions, how did that split between Adeptra and CR Software?

Michael J. Pung – EVP and CFO: Manav, Adeptra was roughly 70% of that $20 million, that was roughly another $5 million from CR and the rest were from the other two small deals.

Manav Patnaik – Barclays Capital: Now, on the Scores side, you talked obviously this quarter you had some nice benefit from mortgage and auto and I guess going forward you’re seeing some modest improvement in the consumer side. Now with the mortgage headwinds for the second half of the year, is there – like how should we read in terms of either the sequential or year-over-year growth on the B2B side at least, I understand B2C will see that benefit from the Experian deal.

William J. Lansing – President and CEO: Yeah, on the B2B side, we’re continuing to see modest growth and I would expect our fourth quarter on the B2B side to be somewhat flat or potentially down depending upon the timing of this slowdown in some of the mortgage refinancing. We’re not seeing that rapidly in the near-term, but there is a possibility we see some flat or downtick on the B2B side, for that reason…

Manav Patnaik – Barclays Capital: I guess last question, nice to see you guys back in the buyback market, just curious on is that – sort of an indication that the M&A activity will slow down or pause for now or is it just that, there aren’t that many deals in the horizon? Anything to read into that?

Michael J. Pung – EVP and CFO: The answer to that is, it’s the same as the answer we’ve had, which is we look at acquisitions on a somewhat opportunistic basis and we can’t completely control the timing of when the right deal comes along and so where we have the cash available and we don’t have the deal, we’re in buyback mode and now and then, the buybacks are going to be suspended, when we need to use the cash for acquisitions. So, I would not read too much into the fact that we bought a bunch of stock this quarter. That could be different next quarter or we could buy a bunch more, I mean, I really can’t say.

License Sales Cycle

Lauren Slabaugh – Stephens, Inc.: This is Lauren Slabaugh is for Carter. Quick question on what you mentioned about the lengthening of the license sales cycle. Could you just give us a little more color on what’s going on behind the scenes, at some of the big banks to cause this?

William J. Lansing – President and CEO: I think it’s a combination of two things. It’s a combination of the environment, that our customers are operating in and we all know that environment and so there is a little more complexity to their side of the equation. And I think the other part of it is the way we are going at our deals, we are looking at larger deals and they naturally take longer to get done and so it’s a combination of both factors…

Lauren Slabaugh – Stephens, Inc.: Then flipping over to the Scores business, could you talk a little bit about the health of the pre-screen marketing business there?

William J. Lansing – President and CEO: On the pre-screen side we’ve seen some modest growth over the last three quarters in a row. On volumes that are being pulled for acquisition and marketing purposes this quarter we saw 8% growth over last year on volume acquisitions and year-to-date we’re up modestly above 4% on a year-to-date basis. We have seen more of the actual revenue growth though coming on the origination side, and that’s been tied more to the mortgage in the autos. So I would say modest improvement nothing eye-popping and off the charts, but several quarters in a row of continued growth is well accepted here.

Manav Patnaik – Barclays Capital: The first just the details in terms of the $20 million, I think you said contribution from acquisitions, how did that split between Adeptra and CR Software?

Michael J. Pung – EVP and CFO: Manav, Adeptra was roughly 70% of that $20 million, that was roughly another $5 million from CR and the rest were from the other two small deals…

Manav Patnaik – Barclays Capital: Now, on the Scores side, you talked obviously this quarter you had some nice benefit from mortgage and auto and I guess going forward you’re seeing some modest improvement in the consumer side. Now with the mortgage headwinds for the second half of the year, is there – like how should we read in terms of either the sequential or year-over-year growth on the B2B side at least, I understand B2C will see that benefit from the Experian deal.

William J. Lansing – President and CEO: Yeah, on the B2B side, we’re continuing to see modest growth and I would expect our fourth quarter on the B2B side to be somewhat flat or potentially down depending upon the timing of this slowdown in some of the mortgage refinancing. We’re not seeing that rapidly in the near-term, but there is a possibility we see some flat or downtick on the B2B side, for that reason.

Manav Patnaik – Barclays Capital: I guess last question, nice to see you guys back in the buyback market, just curious on is that – sort of an indication that the M&A activity will slow down or pause for now or is it just that, there aren’t that many deals in the horizon? Anything to read into that?

Michael J. Pung – EVP and CFO: The answer to that is, it’s the same as the answer we’ve had, which is we look at acquisitions on a somewhat opportunistic basis and we can’t completely control the timing of when the right deal comes along and so where we have the cash available and we don’t have the deal, we’re in buyback mode and now and then, the buybacks are going to be suspended, when we need to use the cash for acquisitions. So, I would not read too much into the fact that we bought a bunch of stock this quarter. That could be different next quarter or we could buy a bunch more, I mean, I really can’t say.

A Closer Look: Fair Isaac Earnings Cheat Sheet>>